Good morning,
Equity markets have now declined for five consecutive weeks. Notably, each of those weeks has followed a similar pattern—Friday weakness followed by a Monday rebound—and this morning is no exception. S&P futures are higher by approximately 0.80% (8:30am ET), despite little reaction to President Trump’s comments regarding “serious discussions” with a potentially more pragmatic regime to end military operations, alongside a renewed threat toward Iranian energy infrastructure should Hormuz remain closed.
Thus far, the major indices are roughly 10% below their recent highs—a threshold that defines a correction. Through Friday’s close, the S&P 500, Nasdaq, Russell 2000, EAFE, and Emerging Markets are down -9.05%, -12.79%, -10.43%, -11.40%, and -13.16%, respectively.
These declines, at least to this point, do not appear to fully reflect the potential consequences of a prolonged conflict in the Persian Gulf. In fact, much of the pressure can be attributed to the rise in interest rates rather than geopolitical risk alone. That distinction matters.
There remains a clear reluctance to turn overly bearish, given the market’s consistent pattern of sharp recoveries following news-driven selloffs—“Liberation Day” being a recent example. That dynamic could assert itself again should we see tangible progress out of the Middle East.
Be well,
Mike